The Lowdown on Monitoring Your Credit With the 3 Credit Bureaus
In the past, if you were a consumer and you wanted to know about your credit report, you had to choose between the three major credit bureaus. This article will give you the lowdown on each bureau, what information they collect, their scoring systems, and how much monitoring your credit with each one costs. In the end, it’ll make the decision much easier. And it will help you understand which one to choose, and why.
Three major credit bureaus
In the early 1900s, creditors first started using credit reporting as a way to check on the credit worthiness of potential customers. Lenders were scattered throughout communities, so they needed to gather information from as many sources as possible to determine a person’s creditworthiness. Over time, however, the bureaus became more important as the amount of people seeking credit increased. In the U.S., over two billion data points are entered into credit records each month. There are roughly one billion credit cards in use today, and many of these credit bureaus have become consolidated into regional entities. Today, TransUnion is the central credit bureau in the U.S., while Experian and Equifax serve the east and south.
Each bureau has different ways of reporting information, which is why it is important to check each bureau’s report. Some data are not reported to all three bureaus at the same time. For example, if a lender reports information to one bureau at different times, that information may appear on your credit report with an inaccurate date. You should also note that some credit agencies focus on specific types of reporting. For instance, PRBC/MicroBilt is a credit reporting agency that works with primarily subprime lenders that lend to low-income consumers with historically poor credit.
Information collected by each bureau
Your credit report contains a number of different pieces of information. Each of the credit bureaus collects different types of information. Specifically, they collect information about your credit accounts, outstanding debt collections, and public records. The information they collect is also non-credit related, such as your current and previous addresses, employers, and date of birth. This information is then used by potential creditors to assess your creditworthiness. For example, if you are thinking about applying for a home loan, these credit bureaus will gather all of the information from your application.
TransUnion is the oldest of the three credit bureaus, beginning in 1968 as a parent holding company for the Union Tank Car Company. In 1969, it expanded into the credit reporting industry, purchasing the Credit Bureau of Cook County, which collected information on 3.6 million Americans. By 1988, the company had full coverage of every market-active adult in the U.S., making it one of the most trusted sources of information for consumers.
Scoring system used by each bureau
When you apply for a loan or credit card, the company will use a credit score to determine whether or not you’re a good risk for the lender. Credit scoring models were first used over 50 years ago to determine a repeatable, workable methodology. Those early models relied heavily on subjectivity and statistical analysis, which resulted in discriminatory loan practices. Luckily, state and federal laws were introduced to help limit this subjectivity and make the process more equitable.
While all three major credit reporting bureaus use similar models to calculate scores, there are some differences in the way these models work. The first distinction is that each bureau may use different models that are more accurate for some people than for others. Whether you’re seeing a ten-point difference or a twenty-point difference depends on the bureau. This is because different lenders use different credit scoring models. Consequently, it’s important to understand which system is being used by each credit bureau.
Cost of monitoring your credit with each bureau
While you can request your free annual credit reports through a toll-free phone number or online, monitoring your credit with each of the three major credit bureaus is not free. Depending on the service you want, you can request your credit reports all at once, or stagger them by ordering one four months later. However, this does not give you a complete picture at any given point in time. The cost of monitoring your credit with each bureau varies greatly, from under $40 to more than $100 per year.
While monitoring your credit score is vital, the cost can be prohibitive. Most credit monitoring services charge between $90 and $480 per year. The most basic plan will monitor one bureau only and track changes in balances and new account inquiries. A Premier plan includes all three bureaus and tracks many additional factors depending on the service. However, the TransUnion report tracks only account status and fraud alerts, so if you’re looking for a higher level of service, you may want to opt for the Advanced or Premier plan.